Proof that predicting short-term stock market moves is almost impossibly hard 🐂

Goldman Sachs revises its 2024 target after just one month 📝

On Thursday, a bull was spotted on the NJ Transit rail line. (Source: @NJTransit)

On Nov. 15, Goldman Sachs’ David Kostin wrote that he expected the S&P 500 to end 2024 at 4,700.

On Friday — just one month later — Kostin raised that target to 5,100.

“Decelerating inflation and Fed easing will keep real yields low and support a P/E multiple greater than 19x,” he wrote on Friday. “Since late October, the S&P 500 has surged by 15% and the Russell 2000 has soared by 23% as real rates plummeted from 2.5% to 1.7%. Our prior year-end 2024 forecast assumed yields of 2.3% and a P/E of 18x.“

Kostin noted that last week’s “bevy of encouraging economic data releases” and “dovish signaling” from the Fed support this more bullish view. (For more, read TKer’s weekly review of the macro crosscurrents.)

That 400-point revision to his S&P target implies an extra 8.5% gain from the original forecast.

Even Goldman Sachs, which boasts one of the most seasoned and sophisticated research departments on Wall Street, is having trouble figuring out what’s next for the market. It’s proof that it is an almost impossible task to accurately predict short-term market moves.

The point of this discussion is not to bash Goldman Sachs. Rather, it’s a reminder to — as we reiterate frequently at TKer — not put too much weight into these short-term targets.

This is not to say you should ignore the research. Much of the work behind these targets is quite good. To Kostin’s credit, he’s arguably been directionally correct (so far). In his Nov. 15 note, he said: “…fund managers will ultimately be rewarded for staying invested through the end of next year.”¹

Will the S&P actually end 2024 at 5,100? That’s anyone’s guess. Between now and then, there’s plenty of time for that target to get revised higher or lower, for whatever reason.

The bulls get some company 🐂

Last year, we published a round up of Wall Street’s 2023 outlook for stocks on Dec. 4, 2022. And in the weeks that followed, more strategists emerged with bearish predictions.

This year, we published the outlooks on Dec. 3. And in the two weeks that followed, a bunch of strategists published bullish predictions.